Why Saving Money Should Be Prioritised Over Investing
Think of saving money as the fight that you must win.
Like going to battle and fighting at the front lines.
One of my favourite films of all time is Gladiator (with Russell Crowe aka Maximus).
Not only is it beautifully made, but it is also hugely symbolic.
In fact, I love this movie so much that I know every single piece of music in it by heart.
Thanks to the amazing work of Hans Zimmer and Lisa Gerrard.
Mary surprised me years back with a live performance of the entire album at the The Royal Albert Hall.
By far one of my best musical experiences as we watched the movie but had the orchestra play live.
If you fancy a listen to one of my favourites, check out Now We Are Free.
You're probably thinking, what on earth does this have to do with saving money?!
Well, you see, having image anchors for important things in life can help you remember them when the time is right.
When I think of saving money and how hard it is, I have this image from the movie in mind:
Yup, it is this intense.
You see that shield he’s holding? That’s your budget!
That man in the not-so-friendly mask is the advertiser. He comes to take and that’s it.
You might remember I told you about him when I wrote about the need to fight the resistance.
The sly tiger represents all the crap things you can buy, which creep into your life but are quietly biting away at your bank balance.
These include all those things you might be paying for each month, which you can either seek alternatives or get rid of altogether. Think gym memberships when you can walk, run or cycle etc.
You see that audience? Those are your friends. Some of them want you to win, and others don’t. The former are a minority.
Know how you can tell which of them you should hang out with? Those with savings ofcourse! They aren’t ordinary. They’re extraordinary and I don’t say that to amuse you.
Look around the country and you’ll find that we are a nation of spenders.
We love everything we cast our eyes on and we want them NOW.
This same attitude has infected most of the West, and a lot of us are sleepwalking into danger ahead.
So, in order to save and win (which you must), you have to fight with intelligence and choose your weapons of war carefully.
Note that Maximus is fighting alone in this scene. Such is life too. All our journeys are individual, so don’t worry about comparing yourself with anyone.
Observe and learn, but don’t compare. Every facet of your life journey is unique to you and you only.
If you have a partner or spouse, then you must both become one and fight on the same team. Otherwise, all efforts will be futile.
Related post: How To Achieve Big Goals With Your Partner
So let’s zoom out make sense of what I’m really saying here.
Essentially, what I’m saying is that Your Savings = A Fight for Your Future.
It has to be that dramatic for the need to do whatever it takes to save, to start to sink in.
Below are other reasons why your savings should be prioritised over investing.
Milk First, Then Meat.
Saving money and investing money are very different things.
Both have different motivations and require different skill sets.
As a dad, I use the Milk and Meat analogy as it's probably the most memorable.
When we are born, we learn to drink milk. We grow up with that for a while before we even attempt eating meat (investing).
You can survive on milk alone but you'd need meat/solid food to grow.
In the same way, if you only focused on saving money alone, you could probably save enough one day to achieve Financial Independence or Early Retirement.
However, you need to ride the big wave of investing in order to speed up that pathway to freedom.
That wave represents money working for you through the beautiful power of compounding interest.
If you've never seen this at work, follow the link above to see how Ben and Lucy get on through their investing choices.
Without saving, you'll have nothing to invest. And investing goes beyond making money work for you.
It also includes the acts of generosity and putting your money to work in other people's lives.
Add to that, it includes the possibility of seeking and making a side hustle or business a reality simply because you have the dry powder to do so.
Create & Grow Wealth
Guess what makes you money? More money!
What I mean here is, if you want to see a significant bang from your buck, you want a lot of money at work.
Imagine you invest £1,000 and get a 10% return on that in a year, i.e. £100.
Think of how differently you'd look at that return if it was a return of 10% on £100,000 i.e. £10,000.
£10,000 has a lot more utility because it can change your life and mine literally. And there are quite a number of people out there making such returns.
Best is, that £10,000 can get reinvested automatically and making even more money, in addition to the original £100,000.
Starting to see why this could be game changing? Ofcourse, money can also move the other way, which is why I refer to investing as a skill set.
Money in the right environment (e.g. Broad based Index funds) can do well if specific risks are reduced to the minimum.
Related post: Investing Risks You Should Be Aware Of.
Get Tax Refunds
We all need to pay tax but we don't all love paying it.
The law allows you to get some of your money back if it's in the right environment.
Pick a private pension such as a Self Invested Pension Plan (SIPP) for example.
Did you know that for every £80 you put into it from your net income, you get back another £20 of tax you paid if you're a basic rate taxpayer?
You also get an additional £20 if you're a higher rate taxpayer.
So £80 saved into your private pension could also gain another £40 from tax rebates even before your money is invested.
This gets even more exciting if you have an employer that matches your contributions.
These are some of the hidden benefits of having a job.
Note though that investments into a pension can't be touched at least till you're 55!
An Individual Savings Account (ISA) offers you tax benefits when you invest your savings but also gives you the flexibility to touch your money.
Be Prepared No Matter What!
Saving money helps you prepare for that inevitable day of doom.
Some people are naturally cautious and don’t bother investing their money at all.
As bad as this might appear, there is also the comfort of knowing that the money is there and is under your control.
When you invest your money, you essentially hand over control to the markets. It can go up or go down, but should certainly not put you off at all.
My experience has shown me that getting my feet wet by investing is by far one of the best things I can do with money.
However, it isn’t done in excitement and without much due diligence and care.
Remember all that fighting to save the money? If one isn’t careful, bad investing could also lead to loss.
Hence the need to learn the skill of investing as time passes.
In the meantime, saving your money is a good as it gets.
It teaches you the discipline necessary to manage your own money, and only by doing that could you manage that of others e.g. through starting a business and having investors.
- My Philosophy On Saving Money
- How Much Money You Should Have Saved By Age
- 10 Reasons Why People Spend More Than They Earn
- How To Budget & Save On a Low Income
- 50+ Ways To Save Over £10,000 Every Year
What are your current struggles with saving money? Please comment below.
Do please share this post if you found it useful, and remember, in all things be thankful and Seek Joy.